Planning for your retirement may seem like an overwhelming task if you are unsure of where to start. Essentially, planning for your retirement is managing your money properly in order to make the most out of your retirement years.
When pondering the amount to save, you must first try to calculate your future retirement needs, wants and a realistic idea of what your living expenses and bills might be. Mentioning needs and wants does not necessarily mean that you will go out and buy everything you want right when you want it, however, there does have to be enough room in your retirement fund to treat yourself. A retirement fund does not simply mean living in luxury; it means living with the comfort in knowing that your expenses, needs and finances will be taken care of.
Having a retirement plan is a great way of setting future goals including the age you want to retire and the lifestyle you want to enjoy. A retirement plan is also a great guideline to knowing how much you want to save as well as any investments you wish to get involved in.
Preparing to save the ideal amount is first decided by a number of factors.
The younger you are, the more time you have to put money aside for your retirement. Sure, there are a number of other things we want to out our money towards when we are young and do not always think about the future but it is important to think of your priorities as well as your wellbeing in the future. Another bonus to starting your retirement fund at an early age is putting less money aside for a longer period of time whereas if you start later it will be essential to put larger sums of money aside to make up for the years when nothing was saved.
Your desired lifestyle
What plans have you made for your future? Perhaps you plan to stay home to maintain your home and property or you wish to leave and explore different countries and lifestyles. The amount you will need to save will depend on your retirement plans. If you wish to travel you will most probably need to save more money than if you plan to relax at home.
Federal government benefits
Federal governments have various retirement benefits retirees may be entitled to. The Canadian Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) are all examples of benefits future retirees should look into. If you determine you are eligible for any of these governmental retirement benefits you may not need to put as much money aside for your retirement.
You must always keep in mind that it is never too late to start saving for your retirement fund, however, the sooner you make the decision to start, the better it will be for your future and the more money you will be able to put aside for your retirement plans. Once you have some money set aside, look into which investments could generate interest to generate more earnings. The more you invest in when you are young, the more interest you will be able to earn over time.
Investing a smaller amount over a longer period of time will have a greater impact than if you save a larger amount over a shorter period. This is where the significance of starting your retirement fund as early as possible comes in handy. The following are some other tips to get you on the right track:
- Contributing to your RRSP my also prove to be beneficial as it allows you to contribute pre-tax money from your salary.
- If your employer offers to match your RRSP, it would be unwise to leave that offer on the table. Be sure to contribute enough to take full advantage of the match; what this comes down to is essentially free money.
- Opening a Individual Retirement Account (TSFA) may be a tax-deductible way to grow tax-deferred earnings until you make withdrawals during retirement
- If you were not able to save as much as you would have liked throughout the years, after age 50 you’re eligible to go beyond the normal limits of the RRSPand TFSA contributions. This means that if you were unable to reach the limit of the contributions each year than you are able to catch-up in order to boost your retirement savings.
- If you are able to, delay your social security benefit. The older you are when you claim your social security benefit, up to age 70, the more your annual payment will be. For each year you wait, your monthly benefit will increase.